Introduction: The author became aware of SynFutures in 2023 due to an interview with Jez, a well-known trader, during which Jez publicly revealed his true identity for the first time. It was later discovered that their investment institutions comprised a top-tier VC lineup in the blockchain industry, leading to close attention to SynFutures. Both founders have previously led the first blockchain platform versions of traditional financial institutions, sparking a keen interest in blockchain. Given their professional backgrounds in derivative business at Deutsche Bank, the decentralized derivative trading platform SynFutures was born.

SynFutures is a platform focused on creating a fully decentralized and high-performance perpetual contract exchange. Anyone can list and trade futures and perpetual equities of any asset on it. Through three iterations, SynFutures has pioneered the oAMM mechanism for perpetual contracts.

1. Financing Situation:

Pantera Capital, Dragonfly, Polychain, and Standard Crypto led the investment, with participation from Framework Ventures, CMS Holdings, Wintermute, Hashkey Capital, Mirana Ventures, IOSG Ventures, Bing Ventures, Bybit, Susquehanna International Group, Kronos Asset Management, and other institutions. The public financing information includes three rounds, totaling $38 million USD, with the last round of financing occurring in October 2023.

2. Team members:

Rachel Lin, Co-founder and CEO, previously held senior positions at Matrixport, Bitmain, and Deutsche Bank’s global markets division. She is a graduate of Peking University and the National University of Singapore.

Matthew Liu, Co-founder and CSO, formerly worked as a bond financial product trader at Deutsche Bank. He is a graduate of Peking University and the Kellogg School of Management at Northwestern University.

Mark Lee, CMO, was the founder of Eightfive PR.

3. Timeline:

The project was established in February 2021.

In June 2021, V1 alpha was opened and audited, deployed on the Polygon public chain, and announced a Series A financing of US$14 million.

In July 2021, the innovative product decentralized BTC computing power futures was launched.

Deployed on Arbitrum, BSC, and Ethereum chains in September 2021. In the same month, FutureX, SynFutures’ DAO pre-committee, was launched to pave the way for decentralized development and governance. The committee was initially composed of community representatives, investors, core contributors and speakers. There have been 19 gathering discussions.

Three trading competitions will be launched in October, November and December 2021. Launched SynAcademy to publish blockchain education articles.

In December 2021, we will begin to build partnerships with other projects and establish an ecosystem.

In February 2022, we will cooperate with Footprint to launch the dashboard.

In March 2022, the function for users to list and trade any asset will be launched.

The V2 test network will be launched in May 2022 and pass the audit.

A bug bounty campaign will be launched in September 2022. In the same month, the V2 mainnet was launched and a trading competition was launched.

NFTures, an NFT futures trading platform, will be launched in January 2023.

V2 will be deployed on the zkSync public chain in June 2023.

The V3 public test network will be launched in October 2023. In the same month, it announced a Series B financing of US$22 million.

In March 2024, V3 was deployed on the Blast public chain and passed the audit, launching points activities and trading competitions.

4. oAMM mechanism

SynFutures adheres to the decentralized and permissionless principles of decentralized finance (DeFi). After undergoing two iterations, SynFutures V3 was launched, introducing the groundbreaking Oyster Automated Market Maker (oAMM) model, which deserves further discussion.

The key features include:

1. Single-asset Concentrated Liquidity: Each derivative trading pair has its own liquidity pool, minimizing systemic risks. Liquidity provision only requires adding a single asset, eliminating the complexity of bilateral liquidity. Based on UniswapV3, concentrated liquidity enhances capital utilization. The oAMM model democratizes market access, even providing automated market-making functions for niche assets, thereby enhancing diversity.

2. Fully On-chain Order Book: Integrating with on-chain ecosystems ensures no backdoors, fund misappropriation, or cross-chain issues, making the system resistant to downtime. This feature provides a convenient environment for professional market makers. SynFutures V3 combines the AMM model with a fully on-chain order book to enhance trading depth.

Additionally, oAMM, as a purely on-chain contract, naturally integrates with the underlying blockchain ecosystem, fostering mutual growth. This addresses a limitation of many semi-decentralized exchanges, as DeFi’s attractiveness lies in its composability and transparency. All data is stored on-chain, allowing for verification by anyone, and traders need not worry about centralized risks like exchange downtime, unplugged networks, or fund misappropriation.

1. Unified Liquidity: Oyster AMM seamlessly integrates centralized liquidity and order books in a single model. In the Oyster AMM, Centralized Liquidity AMM (CLAMM) is represented by curves, while limit orders are represented by price points. Liquidity and all open limit orders at the same price point are described as “pearls.” In cases where limit orders exist, they are executed before consuming any centralized liquidity, if applicable.

2. User Protection and Stability Mechanisms: Oyster AMM introduces financial risk management mechanisms to enhance user protection and price stability. These mechanisms include a dynamic penalty system to prevent price manipulation by penalizing significant deviations between trading prices and marked prices. The dynamic fee system also balances the risk-return situation for liquidity providers. Another mechanism is the stable marked price mechanism, which uses exponential moving averages to mitigate the risk of sudden price fluctuations and large-scale liquidations.

For LPs (Liquidity Providers) who engage with the Concentrated Liquidity AMM aspect of Oyster AMM, they need to input two parameters under a specified pool: the provided collateral amount and the price range of the LP. This price range is similar to UniswapV3’s price range. If the price fluctuates beyond the range, LPs will no longer provide liquidity.

When LPs provide liquidity to Oyster AMM, they create long positions for the liquidity pool and offset short positions for LP accounts. The sum of these positions is the LP’s net position. Initially, the long and short positions are equal, resulting in a net position of 0. The width of the LP’s price range determines the number of long positions created; a wider range creates fewer long positions, and a narrower range creates more. As prices fluctuate within the set range, according to the oAMM mechanism, changes in prices affect the net position and remaining collateral. The xyk curve in the oAMM model reflects changes in the size of long positions, with the base asset and quote asset as the horizontal and vertical axes, respectively. The change in collateral is defined by a separate formula.

Virtual price curve in Oyster AMM

Remove liquidity:

Liquidity providers (LPs) can remove liquidity from their concentrated positions at any time and convert it into trading positions, consisting of the implied net position and remaining margin, as well as the earned fees. Once concentrated liquidity is removed and converted, LPs can manage their trading positions accordingly.

When the market price falls below the lower limit of the price range, the system automatically removes liquidity for the LP and converts it into a long position. Conversely, when the market price rises above the upper limit of the price range, the system automatically removes liquidity and converts it into a short position for the LP.

Since the risks in the pool are balanced, at any given current price, if there is a long position, there will be a corresponding short position. Let’s assume the current price is 1000. When more people short the market, the contract price will drop. For example, if an LP named Alice opens a long position of 100 and a short position of 100, and the price drops from 1000 to 999, it indicates that traders are shorting at market price. If a trader executes a short position of 20 at market price, Alice’s long position increases to 120, while her short position remains at 100, resulting in a net long position of 20. Conversely, if the price rises from 1000 to 1001, indicating traders are longing at market price, and a trader executes a long position of 20 at market price, Alice’s long position decreases by 20 to 80, while her short position remains at 100, resulting in a net short position of 20.

Let’s define some parameters:

Assume that the total value of tokens added by a certain LP provider is M, and M USDC also refers to the total deposit amount.

The current price of Token0 on Token1’s trading pair is Pc.

The lower price and upper price of the selected range are denoted as Pa and Pb respectively.

a is the parameter of the LP price range, where the price upper limit Pb = a · Pc, price floor Pa = Pc / a ，( a > 1 )

The initial margin requirement ratio is expressed as ri.

Use xvirtual and yvirtual respectively to represent the implicit x and y values ​​of the full range constant product model.

Create an initial long position xreal for liquidity, and create an offsetting short position of the same size for the LP.

In the Oyster AMM:

Initial long position

The implied net position when the price reaches the range boundary Pb

The profit and loss of the margin when the price reaches the range boundary Pb is

Even if the above formula Pb is changed to Pa, the profit and loss of the implied net position and margin when the price reaches the interval boundary Pa can be obtained.

Let us give a specific example. When the WBTC price is 61879, Bob adds a deposit of 1000USDB to the WBTC/USDB pool and sets the parameters of the price range. a Set to 3. (The initial margin requirement ratio of this pool is set by the system to ri = 3%, which means the maximum leverage is 33.3 times)

At this time, it can be calculated that: M=1000, the current price of the trading pair is Pc=61879,

The lower limit price of LP is approximately Pa = Pc / a = 20626 , the LP upper limit price is approximately Pb = a · Pc = 185637。

Initial long position xreal = 0.0119 (current value is about 736usdb)

The implied net position when the price reaches the range boundary Pa NetPosition(Pa)=0.0206

At this time, the margin profit and loss is PnL(Pa)=-311 (so the remaining margin situation is 1000-311=689)

The following data is actually measured through the platform: (Since the SynFutures front-end cannot customize α and can only slide the price boundary, there will be a slight difference from the theoretical value)

When the current WBTC price is 61879, the WBTC/USDB trading pair LP situation

5. Progress and Outlook

Currently, SynFutures has launched numerous long-tail asset trading pairs, such as $YES, $PAC, $DEGEN, $WIF, $MERL, etc., achieving over $50 billion in trading volume. Its daily trading volume consistently accounts for about 15% of the decentralized derivatives platform market. According to DeFillma data, its daily trading volume ranks in the top three among decentralized derivatives exchanges.

The platform remains highly active, with updates including the launch of mobile trading and LP features, enhanced data ranges visible in depth charts, and optimized portfolio pages. SynFutures collects user feedback promptly and responds quickly.

Additionally, SynFutures is actively collaborating with major exchanges to promote its platform, aiming for even more impressive performance in 2024, and pushing the on-chain derivatives market to new heights of activity.

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